The White House nominated former Federal Deposit Insurance Corp. board member Jonathan McKernan to be the next director of the Consumer Financial Protection Bureau, according to a document sent to the Senate on Tuesday.
In the interim — until the Senate confirms a nominee — the bureau is still led by Acting Director Russ Vought, under whom an infiltration by Department of Government Efficiency representatives continues. Vought issued a stop-work order Monday that idled the agency and spurred the resignations of its enforcement and supervision chiefs.
Further, the CFPB on Tuesday terminated roughly 70 probationary employees, including enforcement division attorneys, Bloomberg Law reported.
“Unfortunately, the Agency finds that that you are not fit for continued employment because your ability, knowledge and skills do not fit the Agency’s current needs,” read a notice Tuesday from Adam Martinez, the agency’s acting chief human capital officer, according to the publication.
Elizabeth Aniskevich, who has been a senior litigation counsel in the CFPB’s enforcement division since June, is among those the agency is letting go.
“I have succeeded in every job that I’ve been in,” Aniskevich told Reuters, adding that she had graduated in the top 5% of her law school class and was an experienced securities fraud and civil rights litigator. “I am qualified for this job.”
‘Insubordination’
New details emerged, too, on the departures of Eric Halperin and Lorelei Salas, respectively the CFPB’s enforcement and supervision chiefs.
Mark Paoletta, the bureau’s chief legal officer, placed Salas and Halperin on administrative leave Tuesday before the two emailed CFPB staff signaling their resignations, an agency spokesperson told Bloomberg Law.
Paoletta accused Halperin of insubordination, the spokesperson said. Halperin had allegedly made remarks seen as defying the stop-work order and resigned six minutes after receiving an email informing him that he was being placed on leave, according to the New York Post.
“As I’ve said to you in the past, the road to justice for consumers is long, progress is not always linear, and success requires many hands,” Halperin wrote Tuesday in his note to staff. “Your work has made an incredible difference in people’s lives.”
“I know you are concerned about your futures, the future of the bureau, and more importantly, the impact these sweeping changes will have on everyday consumers,” Salas wrote in her note, seen by CNBC. “The ways in which you protect the American consumer cannot be captured in just a few sentences, and too many are unaware of the work you do behind the scenes.”
Zixta Martinez, the CFPB’s deputy director – who led the agency for the two days between former Director Rohit Chopra’s departure and Treasury Secretary Scott Bessent being named acting chief – was also placed on administrative leave, the bureau spokesperson said.
$100M in contracts
Cost-cutting efforts at the CFPB aren’t stopping with personnel.
“We are in the process of canceling hundreds of wasteful and unnecessary contracts worth over $100 million,” a spokesperson with the Office of Management and Budget told Bloomberg Law, referring to the CFPB. “Acting Director Vought is wasting no time getting to the bottom of the waste, fraud and lavish spending at this rogue and weaponized agency and in bringing it to heel.”
The OMB spokesperson is likely speaking on behalf of the CFPB because Vought has ordered the bureau “not to issue public communications of any type.” In addition to serving as the CFPB’s acting director, Vought leads the OMB.
Among the cuts were 102 vendor contracts for the CFPB’s enforcement division, 33 contracts linked to the director’s office and 16 contracts for the bureau’s supervision unit, a CFPB official told Bloomberg Law in an email Tuesday.
A list of “essential” contracts seen by the publication did not include cybersecurity contracts and other internal management systems, meaning those sectors could be vulnerable to cuts.
The McKernan nomination
McKernan’s nomination to lead the CFPB comes a day after he announced he is leaving the board of the Federal Deposit Insurance Corp. If McKernan is confirmed at CFPB, his position would also return him to the FDIC board in a secondary role. First, the Senate Banking Committee generally holds a nomination hearing.
At FDIC, McKernan – along with now-Acting Chair Travis Hill – typically towed a Republican party line against a Democratic majority. McKernan dissented, for example, on the contentious capital requirements increases proposed by outgoing Federal Reserve Vice Chair for Supervision Michael Barr. But McKernan also agreed, at times, with Chopra, the Democratic former CFPB director who also served on the FDIC board. Together, the two supported an effort to persuade asset manager Vanguard to sign a stricter passivity agreement, then attempted to get its peer BlackRock to do the same.
Prescience and precedent
Taken together, the Halperin and Salas resignations, employee terminations and contract cancelations can make a lawsuit filed Sunday by the National Treasury Employees Union look prescient. The legal action aims to block orders Vought issued a day earlier.
“It is substantially likely that these initial directives are a precursor to a purge of CFPB’s workforce, which is now prohibited from fulfilling the agency’s statutory mission,” the union’s legal representation wrote in the suit.
Graham Steele, a Biden-era assistant secretary of financial institutions at the Department, noted that the previous Trump administration also found “certain ways [to take the] CFPB off the beat.”
But Steele called this week’s actions “an escalation.”
“The idea of trying to basically shut the agency down in all but name is a step farther,” he told The Hill.
More regulatory downsizing?
But, as it turns out, the CFPB may not be the only bank regulator the Trump administration aims to downsize.
Trump advisers have examined whether the FDIC could be collapsed into the Treasury Department – and have also discussed combining the FDIC’s regulatory role with the Office of the Comptroller of the Currency under Treasury, The Wall Street Journal reported, citing people familiar with the matter.
One proposal would put a single person in charge of both the OCC and FDIC, allowing the OCC to take on the FDIC’s bank supervision work and potentially its role in resolving failed banks, people familiar with the matter told the publication. That would leave the FDIC in charge of deposit insurance, the people said.